How will Steel and Aluminum Tariffs Impact the Buildings Industry?

05/31/2018 | By Justin Feit

President Trump is ready to follow through on his plans to place tariffs on steel and aluminum imports on some of the U.S.’s closest allies, which include the EU, Canada and Mexico. As talks between EU and U.S. leaders stalled on Thursday, President Trump is expected to levy tariffs on the metal producers from these countries, possibly prompting a Trans-Atlantic trade war.

How will steel and aluminum tariffs impact the buildings industry?

Critics speaking out against the tariffs believe the efforts will do little more than start a trade war and increase aluminum and steel prices. Although supporters claim that jobs will be created in the steel and aluminum production industries, these actions could also have detrimental effects for facilities management.

The tariffs will increase on imports of steel and aluminum by 25 percent and 10 percent, respectively. They are designed to improve production in the U.S., but many critics expect the economy to suffer and for steel and aluminum prices to rise or at least become volatile. With many building systems reliant on these materials (roofing, HVAC equipment, vertical transportation, etc.), facilities managers hoping to make changes could face serious challenges.

Broader Economic Implications

Many forecasts for the new tariffs paint a bleak portrait for the U.S. economy. The tariffs are expected to create volatility in global trade and hurt job creation despite its intentions.

The Trade Partnership, a consulting firm focused on issues of trade policy and international markets, released a report (PDF) suggesting that the wide-reaching implications of these tariffs are expected to cause more harm than good to the overall economic health of the U.S. The steel and aluminum production industries consider these actions a victory.

More than five jobs would be lost overall for every one gained, notes the report. In addition, more than 36,000 job losses are expected in other manufacturing sectors and would cancel out the job gains in the aluminum and steel producing sectors.

Furthermore, there is considerable doubt from economists that the U.S. will be able to produce enough steel and aluminum to keep prices down, which will hurt consumers, especially those working on construction projects. The expected overall economic ramifications, increases in steel and aluminum prices, and a smaller workforce in manufacturing could make retrofit projects for facilities managers much more difficult to budget.

Industry Opposition to the Tariffs

With these expected outcomes, the buildings industry is on shakier ground. Industry experts are voicing their opposition, citing increased costs for vital components to building systems.

Because of the importance of steel and aluminum to contemporary buildings, finding cost-effective solutions that have the same structural integrity will be far more difficult. Moreover, these design challenges will directly affect contracting work for construction projects.

"Firms that are already engaged in fixed-price contracts may be forced to absorb these costs, forcing them to cut back on new investments in equipment and personnel,” says Stephen E. Sandherr, CEO of the Associated General Contractors of America. “Higher steel and aluminum prices will make the kind of infrastructure work President Trump supports more expensive, forcing federal, state and local officials to cut back on projects they can fund. And the likely trade war these new tariffs prompt will diminish demand for private investment in infrastructure as well as construction demand for manufacturing, shipping and distribution facilities.”

Some experts believe that Canada and Mexico might receive an extended exemption as leaders from the three countries negotiate NAFTA, whereas it’s clear that President Trump is taking a harder line on the EU. Nevertheless, the exact impacts of these tariffs will be felt over time for facilities managers, but it’s hard to know exactly what to expect.